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ST958: Topics in Mathematical Finance

Lecturers:

Professor David Hobson, Dr Martin Herdegen, Dr Gechun Liang

Prerequisites:

  • Measure-theoretic Probability
  • Students must have done either ST908 Probability or ST401 Stochastic Methods in Finance.

Restrictions:

  • Students who are not enrolled in the MSc in Financial Mathematics may take at most two of the following modules:
    • ST906 Financial Time Series.
    • ST909 Continuous Time Finance for Interest Rate Models.
    • ST958 Topics in Mathematical Finance.

Commitment:

  • 3 hours of lectures per week. This module runs in Term 2.

Aims:

  • To provide an introduction to three advanced topics in Mathematical Finance.
  • Compute and explain key variables in the relevant models.
  • Apply appropriate mathematical techniques.
  • Analyse and compare different modelling approaches.

This year's topics:

  • Introduction to risk measures
  • Contagion risk and systemic risk
  • Beyond the Black-Scholes model

Topics are motivated by current questions relevant to the financial industry. Topics may change each year. Each topic is taught by a different lecturer.

Assessment:

  • Three in-class tests: each worth 5% of final module mark.
  • Final 2h exam: worth 85% of final module mark.

Illustrative Bibliography (for this year):

  • Föllmer, H. and Schied, A. (2016): Stochastic Finance, 4th ed., de Gruyer.
  • McNeil, A., Frey, R. and Embrechts, P. (2015): Quantitative Risk Management, 2nd rev. ed., Princeton University Press.
  • Eisenberg, L., and Noe, T.H. (2001): Systemic risk in financial systems, Management Science 47(2), 236-249.
  • Collin‐Dufresne, P., Goldstein, R., and Hugonnier, J. (2004): A general formula for valuing defaultable securities, Econometrica 72(5), 1377-1407.
  • Gatheral, J. (2006): The volatility surface: a practitioner’s guide, Wiley.